According to the Small Business Administration, small businesses often opt for a business loan for one of the four reasons: to expand their business, to buy machinery, to strengthen business’s financial status or to start a new business.
The cash flow generated by a small business may not be adequate enough to operate business operations smoothly and make the business grow because that requires more capital. Here’s where business loans come into play.
Around 73% of small businesses go for business loans because they are easy to get.
Here are 5 reasons to get a loan for your small business:
1. To Buy A New/Additional Space
You can apply for a business loan if you wish to expand your business or move from rented space to your own space. There are high chances of such a loan getting approved because when you expand or grow, it gives the vibe that your business is a success.
With such bright prospects, most financial institutions will easily approve your loan, making it easier to get additional space for your business.
2. To Buy New Equipment
When you start a new business, it is obvious that you’d be needing new machinery. However, the cost of buying new equipment is often beyond the reach of a start up or a small business. While one way is to go for used equipment, that holds risks. A better option is often to go for a business loan so that new equipment can be bought.
New equipment means faster production and faster production leads to more profit. Moreover, a business loan can also come in handy when you need to get repairs done.
3. To Increase Staff
You cannot grow your business without increasing the number of staff members. However, it’s not as easy as it sounds.
More employees require more office space, additional equipment and more resources overall and all of these require huge amount of capital.
A business loan can cover up for these expenses and help you grow your business. It’s actually a wise move too because growing a business means more profit and with this additional profit, you will be able to pay back the loan without any trouble.
4. Increase Inventory
Just like equipment, inventory is also very important. When a business begins to thrive, the demand from the customers increases. This means the business has to up the game and increase the supply.
If a business is not able to meet the growing demand, it would risk losing customers who would move to other sellers, i.e: competitors. Secondly, financial problems or less cash flow will affect the productivity of the business leading to its potential demise in the long-run.
5. To Increase Cash Flow
Businesses fail to run day to day operations without steady cash flow. In the case where your business is not profitable but will be with a little cash injection in the foreseeable future, a small business loan may be your saviour. Getting finance can give your business the new lease of life it needs to grow.
According to Unsecuredbusinessloans.com.au, lenders usually offer businesses between $1000 – $50,000 depending upon credit score and collateral at stake. Hence, make sure that you apply for a business loan when you really need it and have the means to return it back on time with a interest rate of around 5%.
A loan can save you in the time of need, but it should not be counted on to run your business.